Exempt Organizations Advisory - Senate Finance Committee Reconciliation Markup Passes Charitable Reforms

Last night the Senate Finance Committee approved a tax reconciliation bill by a 14-6 vote. The bill is expected to go to the Senate floor today for consideration, but it is anticipated that there will be further modifications before the full vote which is expected by the end of the week.

The bill contains several charitable reforms. In yesterday’s Exempt Organization Advisory, we described the charitable provisions in the Chairman’s Modification to the bill which can be accessed here. This Advisory describes the changes to the Chairman’s Modification that were approved by the Committee yesterday.

Sections B.6. ("encourage contributions of real property made for conservation purposes") and B.18. ("expand the base of the tax on private foundation net investment income") of the Chairman’s Modification to the bill were removed for procedural reasons. According to Finance Committee staff, the following additional modifications were made to the charitable provisions:

1. The non-itemizer/itemizer floor was decreased from $250 for single taxpayers and $500 for joint returns to $210 and $420, respectively.
2. Land donation and private foundation excise tax reform were dropped because of capital gains issues, but both will most likely be reinstated on the floor.
3. The provision regarding clothing donations was modified to provide that 1) contributions of clothing or household items for which the taxpayer gets an appraisal are not subject to the proposal, and 2) for contributions of clothing or household items with a claimed value of more than $500, the taxpayer may elect to take the sales price of the item by the charity instead of the amount assigned to the item on the list that the IRS is to publish.
4. With respect to facade easements, penalties for appraisal abuse were made retroactive and the accreditation provision for appraisers was dropped.
5. There were some limited changes to the provisions on donor advised funds to clarify how scholarships can be awarded, extend the time for the payout of illiquid accounts by one year, and allow community foundations to have up to 2% of administrative expenses count for payout purposes. There are some changes to the proposed excess business holding rules for supporting organizations, which will apply only if a donor of the supporting organization controls, directly or indirectly, a supported organization of the supporting organization.

The specific language of the modifications accepted yesterday is not yet available and, upon release, may differ somewhat from the description contained in this Advisory.

For more information on this topic, please contact Catherine W. Wilkinson or Suzanne Ross McDowell.

The Exempt Organization Advisory is a general summary of the law and is not intended as specific legal advice for any organization.

Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

For more information on this topic, please contact the authors or the attorneys with whom you usually work at Steptoe.

Questions and comments about the Exempt Organizations Advisory are always welcome and should be sent to bstone@steptoe.com.